Support NY’s Small Breweries!

This is going to be a quick post; a call to action, really. Once again, the Franchise Act of 1996 is up for amendment, in the form of bill S-1315-2011. At stake is the ability of small brewers to terminate a distribution contract without cause. It would allow any brewery producing under 300,000 barrels of beer and comprising less than 3% of the distributor’s sales to end a contract by paying the distributor the fair market value of the sales they will lose. You can read the whole thing here.

The Franchise Act of 1996 was originally designed to protect distributors from being crushed by large breweries. At the time, the craft beer revolution was in full swing, but hadn’t hit New York very hard yet. There were fewer than 20 breweries in NY; now there are over 60. There were 112 beer distributors in the state; now there are less than 60! Talk about a major shift in power dynamics!

As it stands, a brewery is virtually locked into a distribution agreement. The only way to get out of it is to prove just cause in court (or wait for its termination). Beer distributors are government-mandated middlemen and enjoy near monopolies in their territories. They have far greater resources than any small brewer, so it is unlikely that they will lose in court.

This bill is quite fair: it protects the (few remaining) distributors from large breweries arbitrarily firing them while also requiring a small brewer to PAY them to end the contract. Reality is that if a beer distributor is doing a good job selling a brand, the brewery isn’t going to fire them. The current law simply protects under-performers and hampers free trade.

The bill’s detractors, certain beer distributors who enjoy the monopolistic status quo, claim that it will cause jobs to be lost. This is a specious argument: it might shift jobs to distributors who do a better job of selling craft beer, or even shift them to the breweries themselves. As long as there is beer to be sold there will be a need for sales and delivery people.

If a brewery can increase its sales by ditching a beat distributor, then jobs would actually be created as the brewery’s production increases!

Please contact your state senator and tell them that you support S-1315-2011! Those who are members of the rules committee can be contacted from this page. Brooklyn Senator Golden is still undecided, so contact him here.